<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 3
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 3, 1997 (May 10,
1996)
COMFORCE Corporation
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
--------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-6081 36-23262248
---------------------- ---------------------------------
Commission File Number I.R.S. Employer Identification No.
2001 Marcus Avenue, Lake Success, NY 11042
-------------------------------------- --------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (516) 352-3200
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
As reported in the Company's Form 8-K dated May 23, 1996, on
May 10, 1996, the Company, through its subsidiary, COMFORCE
Technical Services, Inc., purchased, pursuant to the Stock
Purchase Agreement with Project Staffing Support Team, Inc.
and Raphael and Stanley Rashkin, the Asset Purchase Agreement
with RRA, Inc. and Raphael and Stanley Rashkin, and the Asset
Purchase Agreement with DataTech Technical Services, Inc. and
Raphael and Stanley Rashkin, respectively, all of the stock of
Project Staffing Support Team, Inc. and substantially all of
the assets of RRA, Inc. and Datatech Technical Services, Inc.
The Registrant hereby files this Form 8-K/A, Amendment No. 3
to its Form 8-K dated May 23, 1996, as amended by Form 8-K/A,
Amendment No. 2 filed September 25, 1996 and Form 8-K/A,
Amendment No. 1 filed June 3, 1996, to amend the financial
statements included under paragraph (a) of this Item 7.
(a) Financial Statements of Business Acquired
-----------------------------------------
Combined balance sheets of RRA, Inc. and Affiliates,
Datatech Technical Services, Inc., and Project
Staffing Support Team, Inc. as of May 10, 1996 and
for the period January 1, 1996 through May 10, 1996,
and the related combined statements of income,
changes in shareholder's equity, and cash flows for
the years then ended.
Combined balance sheets of RRA, Inc. and Affiliates,
Datatech Technical Services, Inc., and Project
Staffing Support Team, Inc. as of December 31, 1994
and 1995, and the related combined statements of
income, changes in shareholder's equity, and cash
flows for each of the three years for the period
ended December 31, 1995
(b) Pro Forma Financial Information
-------------------------------
Pro forma Consolidated Balance Sheet as of March 31,
1996 (Unaudited).
Pro forma Consolidated Statement of Operations for
the three months ended March 31, 1996 (Unaudited).
Pro forma Consolidated Statement of Operations for
the year ended December 31, 1995 (Unaudited).
<PAGE>
RRA, INC.
DATATECH TECHNICAL SERVICES, INC. AND
PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED FINANCIAL STATEMENTS
AS OF MAY 10, 1996 AND FOR THE PERIOD
JANUARY 1, 1996 THROUGH MAY 10, 1996
<PAGE>
Report of Independent Accountants
To the Shareholders of RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.:
We have audited the accompanying combined balance sheet of RRA, Inc., Datatech
Technical Services, Inc. and Project Staffing Support Team, Inc. (the
"Companies") as of May 10, 1996, and the related combined statements of income,
changes in shareholders' equity, and cash flows for the period January 1, 1996
through May 10, 1996. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of RRA, Inc., Datatech
Technical Services, Inc. and Project Staffing Support Team, Inc. as of May 10,
1996, and the combined results of their operations and their cash flows for the
period January 1, 1996 through May 10, 1996, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Melville, New York
October 28, 1996.
<PAGE>
RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.
Combined Balance Sheet
as of May 10, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Current assets:
Accounts receivable - trade 5,698,118
Notes receivable from related parties 443,801
Account receivable - related party 14,000
Other receivables 38,812
Prepaid expenses and other current assets 99,923
--------------
Total current assets 6,294,654
Fixed assets, net 259,779
Long-term note receivables from related parties 10,124
Other assets 14,960
--------------
Total assets $ 6,579,517
==============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY:
<S> <C>
Current liabilities:
Cash overdraft $ 342,866
Accounts payable 44,238
Note payable - bank 575,000
Accrued payroll and benefits 1,533,732
Accrued expenses 594,534
Accrued pension 1,149,648
Note payable - related party 22,966
--------------
Total current liabilities 4,262,984
--------------
Shareholders' equity:
Common stock 19,560
Additional paid-in capital 415,631
Retained earnings 1,881,342
--------------
Total shareholders' equity 2,316,533
--------------
Total liabilities and shareholders' equity $ 6,579,517
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.
Combined Statement of Income
for the period January 1, 1996 through May 10, 1996
<TABLE>
<S> <C>
Revenue:
Sales $ 22,085,811
Other revenue 713,611
---------------
Total revenue 22,799,422
Expenses:
Employee payroll and benefits 20,958,947
General and administrative 1,174,592
Depreciation and amortization 34,431
Legal settlement 200,000
---------------
22,367,970
---------------
Operating income 431,452
Interest expense 34,310
---------------
Net income $ 397,142
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.
Combined Statement of Changes in Shareholders' Equity
for the period January 1, 1996 through May 10, 1996
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 19,560 $ 415,631 $ 1,928,460 $ 2,363,651
Distributions to shareholders (444,260) (444,260)
Net income for the period
January 1, 1996
through May 10, 1996 397,142 397,142
----------- ------------ -------------- ---------------
Balance, May 10, 1996 $ 19,560 $ 415,631 $ 1,881,342 $ 2,316,533
=========== ============ ============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.
Combined Statement of Cash Flows
for the period January 1, 1996 through May 10, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ 397,142
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization 34,431
Changes in operating assets and liabilities:
Increase in accounts receivable (405,339)
Increase in other receivables (34,002)
Increase in prepaid expenses and other assets (45,780)
Decrease in accounts payable (4,820)
Increase in accrued payroll and benefits 595,167
Increase in accrued pension 429,648
Increase in accrued expenses 366,910
--------------
Net cash provided by operating activities 1,333,357
--------------
Cash flows from investing activities:
Capital expenditures (25,330)
Net receipts (advances) on related party loans 3,458
---------------
Net cash used in investing activities (21,872)
---------------
Cash flows from financing activities:
Bank overdraft (154,013)
Net payments under line of credit agreements (645,000)
Principal payments on notes payable (121,874)
Distributions to shareholders (444,260)
--------------
Net cash used in financing activities (1,365,147)
--------------
Net decrease in cash (53,662)
Cash, January 1, 1996 53,662
-------------
Cash, May 10, 1996 $ -
=============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 34,310
=============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
RRA, Inc., Datatech Technical Services, Inc. and
Project Staffing Support Team, Inc.
Notes to Combined Financial Statements
1. Significant Accounting Policies:
Business Organization
RRA, Inc. ("RRA") was incorporated in 1964 under the laws of the State of New
York. Datatech Technical Services, Inc. ("DTS") was incorporated in 1991
under the laws of the State of Arizona and commenced operations in 1992.
Effective January 1, 1992, certain customer accounts and property and
equipment of RRA were transferred to DTS in exchange for a downpayment of
$25,000 and a note for $150,000. All intercompany transactions have been
eliminated in combination. The Companies are under common management and
control.
Project Staffing Support Team, Inc. ("PSST") was incorporated under the laws
of the State of Arizona and commenced operations in 1994. At inception, PSST
was owned in equal shares by Ray Rashkin and Stanley Rashkin.
Principles of Combination
These combined financial statements include the accounts of RRA, DTS, and
PSST (the "Companies"). All significant intercompany transactions and
balances have been eliminated in combination.
Nature of Business
The Companies provide individuals primarily to large corporate customers that
contract with various governmental entities throughout the United States. The
employees are provided on a temporary or semi-permanent basis. The
individuals are employees of the Companies. The Companies maintain offices in
Arizona, New York, Connecticut, New Mexico, Missouri, Washington, South
Carolina and California.
Cash and Cash Equivalents
The Company considers investments with a maturity of three months or less
when purchased to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
accelerated methods over the estimated useful lives of the assets.
Amortization of leasehold improvements is provided using the straight-line
method over the lesser of the lease term or the estimated useful lives of the
assets.
<PAGE>
Notes to Combined Finacial Statements, Continued
Income Taxes
The Companies have elected under applicable sections of the Internal Revenue
Code to be treated as "S" corporations for income tax purposes. Therefore,
any income, loss and tax credits are reportable by the shareholders on their
individual income tax returns. Certain states in which the Companies do
business do not recognize the "S" corporation status or they impose minimum
taxes which are included in administrative expenses in the accompanying
combined statement of income.
Management's Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. While management believes that these estimates
are adequate as of May 10, 1996, it is reasonably possible that actual
results could differ from those estimates.
Employee Benefit Plan
The Companies maintain 401(k) plans and Section 125 cafeteria plans for the
benefit of their employees. Employees elect to withhold specified amounts
from their wages to contribute to the plans. The Companies have a fiduciary
responsibility with respect to the plans.
Estimated Health Self-Insurance Claims
The Companies maintain a self-insurance plan for those employees who elect to
participate. Under this plan, the Companies are responsible for paying claims
up to $40,000 annually per individual. There are provisions for reinsurance
in the plan. The financial statements include an estimate for claims to be
paid under this policy.
2. Notes Receivable:
<TABLE>
<CAPTION>
Notes receivable consists of the following:
<S> <C>
Note receivable - shareholder, due on demand
with interest at 8% $ 217,332
Note receivable - shareholder, due on demand
with interest at 8% 11,819
Promissory note - shareholder, due on demand
with interest at 8% 214,650
Promissory note from one employee; payable
weekly with interest at 9.5%;
note matures in June 2000; secured by automobile 10,124
------------
Total notes receivable ($443,801 current portion) $ 453,925
============
</TABLE>
<PAGE>
Notes to Combined Financial Statements, Continued
3. Property and Equipment:
Property and equipment consists of the following:
Property and equipment $ 486,350
Leasehold improvements 132,803
-----------
619,153
Less accumulated depreciation (359,374)
-----------
$ 259,779
===========
Depreciation expense for the period ended May 10, 1996 was $29,485.
4. Note Payable - Bank:
Note payable-bank, consists of a revolving line of credit agreement which
provides for borrowings up to the lesser of $4,000,000 or 80% of acceptable
receivables as defined, with interest at prime plus .5%. The interest rate
as of May 10, 1996 was 8.75%. The note is collateralized by accounts
receivable, property and fixtures and inventory, and is personally
guaranteed by the shareholders. The line of credit agreement contains
certain restrictive covenants regarding the financial position of the
Companies. On May 13, 1996, the revolving line of credit was paid in full.
5. Note Payable - Related Party:
Notes payable-related party, consists of the following:
Uncollateralizeded note payable to an individual, due
on demand with interest payable monthly at 11% $ 22,966
===========
<PAGE>
Notes to Combined Financial Statements, Continued
6. Commitments:
The following is a schedule by years of approximate future minimum rental
payments on operating leases:
Period ended
May 12
1997 $ 77,193
1998 64,801
1999 62,521
2000 22,500
2001 -
----------
$ 227,015
==========
Total rent expense was $45,616 for the period ended May 10, 1996.
The Companies are responsible for property taxes, insurance and maintenance
on certain leases.
The Companies currently lease their office facilities in Tempe, Arizona from
one of the shareholders. The lease contains a five-year renewal option. The
rent on this office was $19,710 in the period ended May 10, 1996.
7. Concentration of Credit Risk:
The Companies' trade accounts receivable as of May 10, 1996 consist
primarily of amounts due from major companies requiring the use of technical
specialists in the electronics, avionics, telecommunications and information
technology business sectors. At May 10, 1996, the Companies had six
customers with trade accounts receivable balances that aggregated 74% of the
Companies' total accounts receivable. Percentages of total revenues from
significant customers for the period from January 1, 1996 to May 10, 1996
are as follows:
Customer 1 26%
Customer 2 22%
Customer 3 11%
The Companies maintain cash in bank accounts which at times may exceed
federally insured limits. The Companies have not experienced any losses in
such accounts and believe they are not exposed to any significant credit
risk on their cash balances. The Companies believe they mitigate such risk
by investing cash through major financial institutions.
<PAGE>
Notes to Combined Financial Statements, Continued
8. Common Stock:
Common stock consists of the following:
Common stock, RRA, no par; authorized 200 shares;
issued and outstanding 100 shares $ 19,558
Common stock, DTS, $.01 par; authorized 100 shares;
issued and outstanding 100 shares 1
Common stock, PSST, $.01 par; authorized 100 shares;
issued and outstanding 100 shares (see below) 1
----------
$ 19,560
==========
9. Money Purchase Pension Plan:
On June 1, 1993, the Company adopted a pension plan that contributes 10% to
covered employees. This covered initially the Phoenix based administrative
group. In December 1993, the plan was amended to include employees at
Lawrence Livermore National Laboratory effective January 1, 1994. The
administrative group was removed from the plan on January 1, 1995 and
employees at Los Alamos were included as of May 1, 1995. The accrual as of
May 10, 1996 was $1,149,648. Expense for the period ended May 10, 1996 was
$429,648.
10. Litigation, Claims and Assessments:
DTS complied with a client request to place a former client employee on the
DTS payroll for the purpose of providing payrolling services. The individual
was involved in an accident during his employment which resulted in the
death of the individual, reported injuries to another individual, and damage
to the client's property. A claim has been made against DTS on the theory
that DTS is liable for the individual's alleged negligence in the accident.
On September 30, 1996, DTS entered into a settlement agreement with its
client whereby DTS has no further exposure in connection with the accident
and will not be required to incur any additional costs. The settlement
agreement provides that DTS shall pay the sum of $200,000 to its client in
monthly installments of $30,000. The Company has recorded a liability of
$200,000 as of May 10, 1996.
11. Subsequent Event:
On May 10, 1996, the stock of PSST and substantially all of the assets of
RRA and DTS were sold to Comforce Corporation for an aggregate purchase
price of approximately $5,100,000 plus contingent payments payable over
three years in an aggregate amount not to exceed $650,000.
<PAGE>
Notes to Combined Financial Statements, Continued
In September 1996, the Company received notice of litigation from a
competitor who charged that the Company obtained and benefitted from a list
of confidential data provided by a former employee of the competitor. The
Company has denied such charges. Management and its legal counsel believe
that the resolution of this matter will not result in a material adverse
effect to the financial position of the Company or its operations.
<PAGE>
RRA, INC.
DATATECH TECHNICAL SERVICES, INC. AND
PROJECT STAFFING SUPPORT TEAM, INC.
Combined Financial Statements
as of December 31, 1995 and 1994
Together With Auditor's Report
<PAGE>
To The Shareholders
RRA, Inc., Datatech Technical Services, Inc.
and Project Staffing Support Team, Inc.
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying combined balance sheets of RRA, Inc., Datatech
Technical Services, Inc., and Project Staffing Support Team, Inc. as of December
31, 1995 and 1994, and the related combined statements of income, changes in
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1995. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RRA, Inc., Datatech Technical
Services, Inc., and Project Staffing Support Team, Inc. as of December 31, 1995
and 1994, and the results of their operations and cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic combined
financial statements taken as a whole. The information included in the
accompanying schedules is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Alexander & Devoley P.C.
Phoenix, Arizona
February 1, 1996
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED BALANCE SHEET
For the Years Ended December 31, 1995 and 1994
ASSETS
------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 53,662 $ 426,312
Accounts receivable - trade 5,292,779 3,434,704
Other accounts receivable 4,810 10,411
Note receivable - employee, current portion (Note 2) 9,440 1,810
Note receivable - related parties, current portion (Note 2) 237,114 148,050
Prepaid expenses 49,616 27,284
Investments 4,925 --
---------- ----------
Total current assets 5,652,346 4,048,571
---------- ----------
PROPERTY AND EQUIPMENT (NOTE 1):
Office furniture and equipment 438,607 346,395
Leasehold improvements 131,325 114,435
Vehicles 23,912 215,330
---------- ----------
593,844 676,160
Less accumulated depreciation and amortization 329,890 321,003
---------- ----------
263,954 355,157
---------- ----------
OTHER ASSETS:
Refundable deposits 9,666 50,396
Note receivable - employee, long-term portion (Note 2) 8,829 7,412
Note receivable - related parties, long-term portion (Note 2) 216,000 216,000
Deferred loan fee, less amortization of $3,333 in 1995 and
$5,312 in 1994 1,667 2,188
Organizational costs, less accumulated amortization of
$13,121 in 1995 and $9,841 in 1994 (Note 1) 3,280 6,560
Client lists, less amortization of $14,625 in 1995 and
$8,125 in 1994 (Note 1) 4,875 11,375
---------- ----------
244,317 293,931
---------- ----------
$6,160,617 $4,697,659
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdraft $ 496,879 $ 148,474
Accounts payable 49,058 42,572
Notes payable (Note 4) 38,183 59,823
Note payable - bank (Note 3) 1,220,000 1,200,000
Note payable - shareholder; due on demand at 9.5% 100,000 --
Current portion of long-term debt 6,657 62,978
Accrued expenses:
Wages, vacation, and holiday 756,096 817,041
Payroll taxes and withholdings 182,469 170,283
Gross receipts tax 78,141 64,565
Self insurance claims (Note 1) 140,000 120,000
Interest 9,483 10,999
Pension plan contributions (Note 8) 720,000 285,287
---------- ----------
Total current liabilities 3,796,966 2,982,022
---------- ----------
LONG-TERM DEBT (NOTE 5): -- 73,185
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock (Note 7) 19,560 19,560
Additional paid-in capital 415,631 387,863
Retained earnings 1,928,460 1,235,029
---------- ----------
2,363,651 1,642,452
---------- ----------
$6,160,617 $4,697,659
========== ==========
</TABLE>
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE (Note 1) $52,011,107 $38,559,163 $25,016,730
COST OF REVENUE 47,830,459 35,601,360 23,313,171
----------- ----------- -----------
GROSS PROFIT 4,180,648 2,957,803 1,703,559
GENERAL AND ADMINISTRATIVE EXPENSES 2,991,540 2,289,461 1,487,757
----------- ----------- -----------
INCOME FROM OPERATIONS 1,189,108 668,342 215,802
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (175,338) (167,780) (133,311)
Interest income 37,044 24,993 23,540
Gain on sale of fixed assets 5,385 -- --
----------- ----------- -----------
(132,909) (142,787) (109,771)
----------- ----------- -----------
NET INCOME $ 1,056,199 $ 525,555 $ 106,031
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
-------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $19,559 $240,264 $ 662,843 $ 922,666
CONTRIBUTION TO CAPITAL (NOTE 7) -- 85,000 -- 85,000
DISTRIBUTION TO SHAREHOLDER -- -- (7,500) (7,500)
NET INCOME - 1993 -- -- 106,031 106,031
------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1993 19,559 325,264 761,374 1,106,197
ISSUANCE OF 100 SHARES OF
COMMON STOCK (NOTE 7) 1 -- -- 1
CONTRIBUTIONS TO CAPITAL (NOTE 7) -- 62,599 -- 62,599
DISTRIBUTIONS TO SHAREHOLDERS -- -- (51,900) (51,900)
NET INCOME - 1994 -- -- 525,555 525,555
------- -------- ---------- ----------
BALANCE, DECEMBER 31, 1994 19,560 387,863 1,235,029 1,642,452
REDEMPTION OF STOCK AND CAPITAL
(NOTE 7) -- (25,000) -- (25,000)
CONTRIBUTIONS TO CAPITAL (NOTE 7) -- 52,768 -- 52,768
DISTRIBUTIONS TO SHAREHOLDERS -- -- (362,768) (362,768)
NET INCOME - 1995 1,056,199 1,056,199
---------- ----------
BALANCE, DECEMBER 31, 1995 $19,560 $415,631 $1,928,460 $2,363,651
======= ======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 50,152,358 $ 37,544,620 $ 25,179,069
Cash paid to suppliers and employees (50,220,197) (36,842,673) (24,664,840)
Interest paid (176,854) (98,437) (137,683)
Interest received 674 3,544 51
------------ ------------ ------------
NET CASH (USED IN) PROVIDED FROM OPERATING
ACTIVITIES (244,019) 607,054 376,597
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (109,101) (321,652) (55,553)
Net receipts (advances) on related party loans 17,765 (17,845) (115,820)
Net receipts (advances) on employee loans 2,953 (9,222) --
Purchase of investment stock (4,925) -- --
Business list purchase -- -- (19,500)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (93,308) (348,719) (190,873)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft 348,405 148,474 --
Borrowings under line of credit agreements 32,330,000 8,433,040 6,500,000
Payments under line of credit agreements (32,310,000) (8,474,700) (6,669,856)
Principal payments on notes payable - other (21,640) (117,649) (69,251)
Proceeds from stock issuance or capital contributions 27,768 62,600 85,000
Distributions to shareholders (362,768) (51,900) (7,500)
Proceeds from long-term debt -- 190,285 --
Proceeds from sale of fixed assets 87,418 -- --
Payments on long-term debt (129,506) (54,122) --
Payment of deferred loan fee (5,000) (7,500) --
------------ ------------ ------------
NET CASH (USED IN) PROVIDED FROM FINANCING
ACTIVITIES (35,323) 128,528 (161,607)
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (372,650) 386,863 24,117
CASH AT BEGINNING OF YEAR 426,312 39,449 15,332
------------ ------------ ------------
CASH AT END OF YEAR $ 53,662 $ 426,312 $ 39,449
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994, and 1995
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
(USED BY) PROVIDED FROM OPERATING
ACTIVITIES:
NET INCOME $ 1,056,199 $ 525,555 $106,031
----------- ----------- --------
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH (USED BY) PROVIDED FROM
OPERATING ACTIVITIES:
Depreciation and amortization 114,743 133,454 57,819
(Gain) Loss on abandonment and sale of fixed
assets (5,385) 2,067 --
Increase in accounts receivable (1,858,075) (1,010,999) 162,339
Decrease in other receivables 5,601 6,883 7,220
Decrease (Increase) in prepaid expenses and
deposits 18,398 (19,887) 72
(Decrease) Increase in accounts payable (3,014) 23,764 (5,801)
Increase in accrued expenses 427,514 946,217 48,917
-------- ----------- --------
Total adjustments (1,300,218) 81,499 270,566
----------- ----------- --------
NET CASH (USED BY) PROVIDED FROM
OPERATING ACTIVITIES $ (244,019) $ 607,054 $376,597
=========== =========== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1995 and 1994
(1) SIGNIFICANT ACCOUNTING POLICIES:
Business organization
---------------------
RRA, Inc. (RRA) was incorporated in 1964 under the laws of the State of
New York. Datatech Technical Services, Inc. (DTS) was incorporated in 1991
under the laws of the State of Arizona and commenced operations in 1992.
Effective January 1, 1992, certain customer accounts and property and
equipment of RRA were transferred to DTS in exchange for a down payment of
$25,000 and a note for $150,000. The terms of the note call for 10 equal
annual payments to RRA from DTS of $22,354, which includes principal and
interest at 8%. The note receivable and note payable have been eliminated
in combination. DTS charged RRA $225,350 in 1994 and $150,000 in 1993 for a
management fee. Any income or expense related to these transactions have
been eliminated in combination. The Companies remain under common
management and control. Ray Rashkin owns 100% of RRA. Stanley Rashkin owns
100% of DTS.
Project Staffing support Team, Inc. (PSST) was incorporated under the
laws of the State of Arizona and commenced operations in 1994. At
inception, PSST was owned in equal shares by Ray Rashkin and Stanley
Rashkin. PSST had no revenue in 1994, and absorbed $41,327 in costs.
In 1995, RRA charged PSST $208,607 for a management fee. Ray Rashkin
redeemed his shares during the year, leaving Stanley Rashkin as the sole
shareholder of PSST (see note 7).
Principles of combination
-------------------------
These combined financial statements include the accounts of RRA, DTS,
and PSST. All significant intercompany transactions and balances have been
eliminated in combination.
Nature of business
------------------
The Companies provide highly trained individuals primarily to large
corporate customers that contract with various governmental entities
throughout the United States. The employees are provided on a temporary or
semi-permanent basis. The individuals are employees of the Companies. The
Companies maintain offices in Arizona, New York, Connecticut, New Mexico,
Missouri, Washington, South Carolina, and California.
The companies have two major contracts that are renewable. One of the
contracts started early in 1994. Management is confident these contracts
will continue. The largest of the two renewed for five years, and the other
contract was extended for the second option year to January 1997.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Property and equipment
----------------------
Property and equipment are stated at cost. Depreciation is provided
using accelerated methods over the estimated useful lives of the assets.
Amortization of leasehold improvements is provided using the straight-line
method over the lesser of the lease term or the estimated useful lives of
the assets. Depreciation expense was $99,442, $118,362 and $52,914 in 1995
1994, and 1993 respectively.
<PAGE>
Organizational costs, client lists and deferred loan fees
---------------------------------------------------------
Organizational costs for DTS are being amortized on a straight-line
basis over five years. Client lists purchased for $19,500 are being
amortized over three years. Deferred loan fees are being amortized over the
term of the revolving line of credit agreement.
Concentration of risks
----------------------
Periodically during the year, the Companies maintain cash in financial
institutions in excess of the amounts insured by the Federal government.
Income taxes
------------
The Companies have elected under applicable sections of the Internal
Revenue Code to be treated as "S" Corporations for income tax purposes.
Therefore, any income, loss and tax credits are reportable by the
shareholders on their individual income tax returns. In 1995, the owners
drew approximately $335,000 to pay estimated taxes on the earnings from
these entities, with an additional $70,000 drawn in January 1996. Certain
states in which the Companies do business do not recognize the "S"
Corporation status or they impose minimum taxes. State income taxes are
more of a license cost. They are included in administrative expenses in the
accompanying combined statement of income. DTS reports to the Internal
Revenue Service using the cash basis of accounting.
Employee benefit plan
---------------------
The Companies maintain 401(k) plans and Section 125 cafeteria plans for
the benefit of their employees. Employees elect to withhold specified
amounts from their wages to contribute to the plans. The Companies have a
fiduciary responsibility with respect to the plans.
Estimated health self-insurance claims
--------------------------------------
The Companies maintain a self-insurance plan for those employees who
elect to participate. Under this plan, the Company is responsible for
paying claims up to $40,000 annually per individual. The financial
statements include an estimate for claims to be paid under this policy. See
the accompanying supplementary schedule of Combined Cost of Revenue for the
cost of healthcare benefits.
There are provisions for reinsurance in the plan. Amounts for claims
greater than $40,000 annually per individual are fully insured.
Revenue
-------
Revenues are earned based upon negotiated contracts with large corporate
customers. The negotiated wages are charged to the customers based on an
employee's salary or the hours worked and the labor category that the
employee holds. Revenue is recognized when earned, and billings are
submitted weekly to encompass the proceeding week's income producing
employee payroll.
<PAGE>
(2) NOTES RECEIVABLE:
Notes receivable - related parties consists of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Note receivable - shareholder, is an informal, unsecured
agreement due on demand with interest at 8% $ 6,830 $ 57,604
Note receivable - shareholder, is an informal, unsecured
agreement due on demand with interest at 8% 213,737 81,705
Accrued interest on the above 16,547 8,741
-------- --------
Total shown as a current asset $237,114 $148,050
======== ========
Note receivable - shareholder, is an unsecured note
which requires monthly interest only payments at prime
plus 1.5% through 2005 when all principal and interest
is due; 1995 and 1994 include $16,000 in accrued
interest receivable $216,000 $216,000
======== ========
Note receivable - employee consists of the following:
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Promissory note from one employee; payable weekly
with interest at 8%; note matures in July 1999; Upon
termination, the note is immediately due and payable. $ 7,374 $ 9,222
Promissory note from one employee; payable weekly
with interest at 9.5%; note matures in June 2000; secured
by automobile. 10,895 --
-------- --------
Less current portion 18,269 9,222
9,440 1,810
-------- --------
$ 8,829 $ 7,412
======== ========
</TABLE>
(3) NOTE PAYABLE - BANK:
Note payable - bank, consists of a revolving line of credit agreement
which provides for borrowings up to the lesser of $4,000,000 or 80% of
acceptable receivables as defined, payable in full May 1, 1996 with
interest at prime plus .5%. The interest rate as of December 31, 1995 was
8.75%. The note is collateralized by accounts receivable, property and
fixtures, and inventory, and is personally guaranteed by the
shareholders. The line of credit agreement contains certain restrictive
covenants regarding the financial position of the Companies. The
Companies were in compliance with respect to the restrictive covenants as
of December 31, 1995 and 1994.
<PAGE>
(4) NOTES PAYABLE - OTHER:
Notes payable - other consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Unsecured note payable to an individual, due on demand
with interest payable monthly at prime plus 1.5%. $ -- $ 3,346
Unsecured note payable to an individual, due on demand
with interest payable monthly at prime plus 1.5%. -- 56,477
-------- --------
$ -- $ 59,823
======== ========
</TABLE>
A new agreement was entered at the end of 1995 with the party of the
first note mentioned above. The note is due on demand with interest
payable monthly at 11%. The balance on December 31, 1995 was $38,183.
(5) LONG-TERM DEBT:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
6.75% notes payable to Toyota Motor Credit Corp;
aggregate monthly payments of $5,854, including
interest; original amount of $190,285 beginning in
January 1994; matures in January 1997; secured by
vehicles. $ 6,657 $136,163
Less current portion 6,657 62,978
-------- --------
$ -- $ 73,185
======== ========
</TABLE>
Eleven 1994 Toyota trucks were purchased in 1994 and were leased
individually to a large customer for $550 per month. In 1995, ten of the
vehicles were sold and the notes were paid off. The remaining note was
paid off in January 1996.
(6) COMMITMENTS:
As of December 31, 1995, the Companies have the following commitments
for operating facilities, which are accounted for as operating leases:
<TABLE>
<CAPTION>
Approximate
Expiration base monthly
of lease rent
---------------------- -----------------
<S> <C> <C>
Plainview, New York Month-to-month $ 1,000
Tempe, Arizona January, 2000 4,380
Albuquerque, New Mexico October, 1996 1,185
Stamford, Connecticut Month-to-month 145
Greenville, S. Carolina June, 1996 419
Kennewick, Washington October, 1996 705
St. Louis, Missouri December, 1996 554
Carlsbad, New Mexico December, 1996 450
</TABLE>
The Companies are responsible for property taxes, insurance and
maintenance on certain leases.
<PAGE>
The Companies currently lease their office facilities in Tempe,
Arizona from one of the shareholders. The lease contains a five-year
renewal option. The rent on this office totalled $54,932 in 1995, $47,938
in 1994 and $42,864 in 1993.
The following is a schedule by years of approximate future minimum
rental payments on operating leases. The leases in New York, Connecticut,
and Arizona are included through 2000:
Year ended
December 31,
------------
1996 $ 99,762
1997 66,300
1998 66,300
1999 66,300
2000 66,300
--------
$364,962
========
Total rent expense was $98,822 for the year ended December 31, 1995,
$94,653 for 1994 and $89,059 for 1993.
(7) COMMON STOCK AND CONTRIBUTIONS TO CAPITAL:
Common stock consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Common stock, RRA, no par;
authorized 200 shares;
issued and outstanding 100 shares $19,558 $19,588
Common stock, DTS, $.01 par;
authorized 100 shares;
issued and outstanding 100 shares 1 1
Common stock, PSST, $.01 par;
authorized 100 shares;
issued and outstanding 100 shares (see below) 1 1
------- -------
$19,560 $19,560
======= =======
</TABLE>
A contribution to capital for $85,000 was made for the year ended
December 31, 1993 as part of "S" Corporation tax planning.
Contributions to capital for the year ended December 31, 1994 were
used in part as equity for the new corporation (PSST) and totaled
$49,999. An additional $12,600 was contributed to capital at the owner's
discretion.
In July 1995, PSST redeemed Ray Rashkin's fifty shares upon his
resignation as president of the corporation. The shares were retired by
the corporation at fifty-percent of the net equity of the corporation as
of June 30, 1995.
This transaction had the effect of lowering the issued and outstanding
shares to fifty. Paid in capital of PSST was reduced by $25,000. Ray
Rashkin used the proceeds from the redemption as additional paid in
capital of RRA, Inc.
<PAGE>
(8) MONEY PURCHASE PENSION PLAN:
On June 1, 1993, the Company adopted a pension plan that contributes
10% to covered employees. This covered initially the Phoenix based
administrative group. In December, 1993, the plan was amended to include
employees at Lawrence Livermore National Laboratory effective January 1,
1994. In 1995, the administrative group was removed from the plan on
January 1, and employees at Los Alamos were included as of May 1. The
accrual as of December 31, 1995 and 1994 was $720,000 and $285,287,
respectively. Expense for 1995, 1994 and 1993 was $911,339, $269,913, and
$9,089, respectively.
(9) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For purposes of the Statement of Cash Flows, management considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Bank overdrafts are included as a financing activity because of their
direct relation to line of credit funding.
Cash paid during the years ended December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest $176,854 $ 98,437 $137,683
======== ======== ========
</TABLE>
Noncash investing and financing activities
------------------------------------------
During 1994, the Washington and Texas offices were closed. Assets with
a book value of $2,067 were written off.
A financing arrangement for the purchase of trucks was entered in
1994. Assets were capitalized and loans were obtained totalling $190,285
in connection with this transaction.
Common stock and paid in capital for PSST were made in 1994 through
adjustments to retained earnings and notes receivable from related
parties. In relation to this, the redemption of stock in 1995 for $25,000
was an adjustment to paid in capital and notes receivable (see note 7).
In 1995, a truck owned by the company was purchased by an employee for
a note for $12,000. A truck was purchased by a shareholder as a note
receivable for $6829.
(10) LITIGATION, CLAIMS, AND ASSESSMENTS:
DTS complied with a client request to place a former client employee
on the DTS payroll for the purpose of providing payrolling services. The
individual was involved in an accident during his employment which
resulted in the death of the individual, reported injuries to another
individual, and damage to the client's property. A claim has been made
against DTS on the theory that the company is vicariously liable for the
individual's alleged negligence in the accident.
The injured individual has filed a personal injury lawsuit against DTS
and the client. A recent settlement demand was made for $1.2 million. In
addition, the client has informally requested that DTS settle with it for
the property damage that they approximate to be $1.58 million.
DTS will vigorously defend the current lawsuit and any other legal
action that is taken against it in relation to this occurrence.
Due to the facts described above, the amount of possible loss to DTS
cannot be reasonably estimated, although it is possible that a loss may
occur as a result of this legal action. Any potential loss has not been
recorded on the accompanying financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED COST OF REVENUE
For the Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Salaries $38,288,202 $28,451,365 $18,864,072
Payroll Taxes 3,335,931 2,493,840 1,642,875
Per Diem 1,524,415 714,387 878,097
Healthcare Benefits 1,173,836 986,378 348,047
Other 57,894 199,329 197,129
Subcontractors -- 19,975 2,275
Vacation and Holiday Pay 2,276,145 2,231,270 1,216,704
Workman's Compensation Insurance 262,697 234,903 154,883
Pension Plan 911,339 269,913 9,089
----------- ----------- -----------
$47,830,459 $35,601,360 $23,313,171
=========== =========== ===========
</TABLE>
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED GENERAL AND ADMINISTRATIVE EXPENSES
For the Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Salaries:
Officers $ 462,217 $ 326,333 $ 179,148
Office 897,526 619,640 468,159
Payroll Taxes 97,141 72,113 54,095
Accounting 23,221 10,850 26,991
Advertising 85,984 37,844 19,738
Business Developments 66,241 5,587 6,608
Commissions 85,279 42,150 27,763
Depreciation and Amortization 114,743 133,454 57,819
Insurance 129,973 105,860 65,248
Legal Fees 82,644 89,082 45,291
Licenses and Fees 12,873 3,150 5,182
Miscellaneous 59,997 124,164 57,037
Office Expense 165,433 117,798 73,279
Outside Services 159,348 147,220 81,054
Property Taxes 11,221 2,430 1,855
Rent 104,968 96,010 89,059
Repairs and Maintenance 25,242 9,821 9,321
Telephone 104,230 90,802 82,997
Travel and Subsistence 287,473 237,242 124,032
Utilities 15,786 15,844 13,081
---------- ---------- ----------
$2,991,540 $2,287,394 $1,487,757
========== ========== ==========
</TABLE>
<PAGE>
Item 7(b) Pro Forma Financial Information
-------------------------------
The following unaudited pro forma condensed consolidated balance sheet at March
31, 1996 presents the financial position of the company at March 31, 1996 as if
the acquisition of RRA Inc. and affiliates had been consummated as of March 31,
1996. The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31 ,1995 and for the three months ended March 31 ,1996
presents the company's results of operations as if the acquisitions of COMFORCE
Global, Williams, and RRA Inc. and affiliates had been consummated as of January
1, 1995.
COMFORCE CORPORATION
PRO FORMA BALANCE SHEET
MARCH 31,1996
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical RRA INC Adjustments Consolidated
---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and equivalents 225 320 (320) (A) 225
Receivables, including $330 of unbilled revenue 2,130 4,473 (4,473) (A) 2,130
Other 54 279 (279) (A) 54
Receivables from ARTRA GROUP incorporated 734 - - 734
Prepaid expenses - 69 - (A) 69
------- ------ ------ ------
3,143 5,141 (5,072) 3,212
------- ------ ------ ------
Property, plant and equipment, net 88 256 - (A) 344
------- ------ ------ ------
Other assets:
Goodwill, net 6,817 - 4,634 (A) 11,451
Other 170 228 (228) (A) 170
------- ------ ------ ------
6,987 228 4,406 11,621
------- ------ ------ ------
10,218 5,625 (666) 15,177
======= ====== ====== ======
Current Liabilities:
Notes payable 500 100 (100) (A) 500
Revolving credit line due bank 1,900 500 (500) (A) 1,900
Accounts payable 188 - - (A) 188
Accrued expenses 781 2,449 (2,449) (A) 781
Income taxes 66 - - 66
Liabilities to be assumed by ARTRA GROUP Incorporated
and net of liabilities of discontinued operations 2,964 - - 2,964
------- ------ ------ ------
6,399 3,049 (3,049) 6,399
------- ------ ------ ------
Obligations expected to be settled by the issuance of
stock 550 - - 550
------- ------ ------ ------
Long term note payable - 58 (58) (A) -
------- ------ ------ ------
Shareholders' Equity:
Series E preferred stock - - 1 (B) 1
Common stock 93 20 (20) (A) 93
Additional paid-in capital 3,076 416 4,542 (A)(B) 8,034
Retained earnings 100 2,082 (2,082) (A) 100
------- ------ ------ ------
3,269 2,518 2,441 8,228
------- ------ ------ ------
10,218 5,625 (666) 15,177
======= ====== ====== ======
</TABLE>
Pro Forma adjustments to the unaudited condensed consolidated balance sheet
consist of:
(A) Record acquisition of RRA Inc. and affilites and related entries and
eliminate RRA Inc. assets and liabilities not purchased or assumed. Assets
assumed in this transaction were prepaids and property, plant and
equipment. No liabilities were assumed by COMFORCE.
(B) Record issurance of Series E preferred shares which proceeds were used to
acquire RRA Inc.
<PAGE>
COMFORCE CORPORATION
Pro Forma Statement of Operations
For the Three Months Ended March 31, 1996
(Unaudited in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical (A) Williams (B) RRA Inc. (B) Adjustments Pro Forma
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,265 $ 654 $15,137 $19,056
-------- ------ ------ ------
Operating costs and expenses:
Cost of revenues 2,452 281 14,060 16,793
Other operating costs and expenses 645 38 786 $111(C) 1,580
-------- ------ ------ ------ ------
3,097 319 14,846 111 18,373
-------- ------ ------ ------ ------
Operating earnings (loss) 168 335 291 (111) 683
-------- ------ ------ ------ ------
Other income net 3 3
Interest and other non-operating expenses (1) (22) (30)(D) (53)
-------- ------ ------ ------ ------
2 (22) (30) (50)
-------- ------ ------ ------ ------
Earnings (loss) from operations before income taxes 170 335 269 (141) 633
(Provision) credit for income taxes (70) (265) (107) 56 (386)
-------- ------ ------ ------ ------
Income (loss) from operations $ 100 $ 70 $ 162 $ (85) $ 247
======== ====== ====== ====== ======
Income per share from continuing operations $ .01 $ .02
======== ======
Weighted average shares of common stock and
common stock equivalents outstanding (E) 10,884 11,771
======== ======
</TABLE>
Pro Forma adjustments to the unaudited consolidated statement of operations
consist of:
(A) Historical data for the three months ended March 31, 1996 includes
COMFORCE Global's operations since January 1, 1996 and Williams
operations since its acquisition on March 3, 1996 through March
31,1996.
(B) The pro forma data presented for William's operations is for
the period prior to its acquisition on March 3, 1996 or January 1,
1996 through March 2, 1996. The period presented for RRA
Inc. and affiliates is January 1, 1996 through March 31, 1996.
(C) Amortization of goodwill arising out of the Global, Williams and RRA
Inc. acquisitions. The table below reflects the amounts and where
amortization of goodwill has been recorded.
Historical COMFORCE $ 69,000
Historical COMFORCE Global ---
Williams ---
RRA Inc. ---
Proforma Adjustments 111,000
--------
Adjusted Pro forma $180,000
========
(D) To record interest expenses incurred for the purchase of Williams for
the three months ending March 31,1995 and record interest expense
incurred for the purchase of Williams for the two months from January
1, 1996 to February 29, 1996. Assuming $1,900,000 balance was
outstanding the entire time at the interest rate in effect of 8.5%.
(E) Pro forma weighted average shares outstanding and common stock
equivalents includes shares of the Company's common stock issued in the
private placement of Series E Preferred Stock issued to fund the RRA
acqusition.
<PAGE>
COMFORCE CORPORATION
Pro Forma Statement of Operations
For the Year Ended December 31, 1995
(Unaudited in thousands, except per share data)
<TABLE>
<CAPTION>
COMFORCE Pro Forma
Historical (A) Global (B) Williams (B) RRA Inc. (B) Adjustments Pro Forma
---------- ---------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,387 $ 9,568 $ 4,178 $ 52,011 $ 68,144
---------- ---------- ------------ ------------ ----------- ---------
Operating costs and expenses:
Cost of revenues 1,818 7,178 3,022 47,830 59,848
Stock compensation (C) 3,425 3,425
Spectrum corporate management fees (F) 1,140 1,140
Other operating costs and expenses 823 1,397 450 2,992 $ 531(D) 6,193
---------- ---------- ------------ ------------ ----------- ---------
6,066 9,715 3,472 50,822 531 70,606
---------- ---------- ------------ ------------ ----------- ---------
Operating earnings (loss) (3,679) (147) 706 1,189 (531) (2,462)
---------- ---------- ------------ ------------ ----------- ---------
Interest and other non-operating expenses (618) 7 (133) 248(E) (496)
---------- ---------- ------------ ------------ ----------- ---------
(618) 7 --- (133) 248 (496)
---------- ---------- ------------ ------------ ----------- ---------
Earnings (loss) from operations before
income taxes (4,297) (140) 706 1,056 (283) (2,958)
(Provision) credit for income taxes (35) 21 (354) (422) 113 (677)
---------- ---------- ------------ ------------ ----------- ---------
Income (loss) from operations $ (4,332) $ (119) $ 352 $ 634 $ (170) $(3,635)
========== ========== ============ ============ =========== =======
Income (loss) per share from continuing
operations $ (0.95) $ (0.39)
========= ======
Weighted average shares of common
stock and common stock
equivalents outstanding (G) 4,596 9,309
========= ======
</TABLE>
<PAGE>
Pro Forma adjustments to the unaudited consolidated statement of operations
consist of:
(A) Historical data for the year ended December 31, 1995 includes COMFORCE
Global's operations since its acquisition on October 17, 1995 through
December 31, 1995 and corporate overhead costs for the entire year
ended December 31, 1995.
(B) The pro forma data presented for COMFORCE Global's operations is for
the periods prior to its acquisition on October 17, 1995 or January 1,
1995 through October 16, 1995. The period presented for Williams is
January 1, 1995 through December 31, 1995. The period presented for RRA
Inc. and affiliates is January 1, 1995 through December 31, 1995.
(C) Represents a non-recurring compensation charge related to the issuance
of the 35% common stock interest in the Company to certain individuals
to manage the company's entry into and development of the
telecommunications and computer technical staffing services business.
(D) Amortization of goodwill arising out of the Global, Williams and RRA
Inc. acquisitions. The table below reflects where amortization of
goodwill has been recorded.
December 1995
-----------
Historical Comforce Corp. $ 51,000
Historical Global` 142,000
Williams ---
RRA Inc. ---
Proforma Adjustments 531,000
-----------
Adjusted proforma per
financial statements $ 724,000
===========
(E) Reverse interest expense on notes and other liabilities assumed by
ARTRA totaling $410,000 net of interest expense incurred for the
purchase of Williams for the pro forma year ended December 31, 1995.
Interest expense for December 31, 1995 represents interest on the line
of credit assuming all $1,900,000 was outstanding for the year at the
interest rate in effect of 8.5%. The interest expense reversed in 1995
was for interest on notes directly related to Lori Corporation
activities and were incurred in 1995.
(F) Corporate management fees from COMFORCE Global's former parent,
Spectrum Information Technologies, Inc. The amount of these management
fees may not be representative of costs incurred by COMFORCE Global on
a stand alone basis.
(G) Pro forma weighted average shares outstanding and common stock
equivalents includes shares of the Company's common stock issued in the
private placement that funded the COMFORCE Global transaction and the
private placement of Series E Preferred Stock issued to certain
individuals to manage the Company's entry into and development of the
telecommunications and computer technical staffing services business,
as if they had been issued on January 1, 1995.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
COMFORCE Corporation
--------------------
(Registrant)
By /s/ Andrew C. Reiben
---------------------------------------------
Andrew C. Reiben, Director of Finance
Chief Accounting Officer
Dated: February 3, 1997
